Investment in clinical coding now critical

NHS trusts must urgently invest in the financial and performance management and supporting information systems, the Audit Commission says in its new report on the early lessons from Payment by Results (PbR).

The report, ‘Early lessons from payment by results’, says it is vital that trusts have good quality information systems and data. "Good information systems that produce high-quality data on clinical activity and cost are important for sound management and delivery of patient care. Under Payment by Results they are also of critical importance to financial and risk management."

Clinical coding, of both diagnosis and procedures, is identified as a particularly important under PbR – as these provide the two main determinants of the Healthcare Resource Group (HRG) that a patient is assigned to. This, in turn, links to payment.

"Incomplete coding translates to loss of income for trusts, while inaccurate coding leads to inaccurate payments, which can impact negatively on the finances of providers or commissioners," says the report.

It goes on to note that the Audit Commission, the independent public efficiency watchdog, has previously "highlighted weaknesses in clinical coding at NHS trusts.

Problems identified include "significant levels of uncoded activity, outdated patient administration systems and weak coding arrangements". The report says that there are already signs that PbR is leading to trusts giving a greater emphasis to coding.

Given the vital importance of information systems, accurate data and coding the report warns trusts to be careful that the introduction of new IT systems under NHS Connecting for Health does not disrupt their availability of activity information, a situation that several sites taking CfH systems in 2004-2005 found themselves in.

"In extreme cases, it resulted in no activity information being available for the majority of the financial year. Under payment by results, where income is based on activity levels, this exposes trusts to considerable financial risk."

One of the predictions the report makes, based on the experience in Australia where PbR was introduced a decade ago, is that as coding directly links to payments there will be a sharp growth in number of diagnostic codes assigned to each patient – a trend already being seen among Foundation trusts which currently average 2.4 diagnoses. In Australia the average is about three and in the US the average is closer to six.

Given the growing importance of coding, and in advance of the introduction of NHS-wide clinical IT systems that in the future are intended to contain all information coded into SNOMED CT, the report predicts that the pay and status of clinical coders will sharply rise.

"We can expect to see an increase in the pay and status of clinical coders in the next few years," says the report.

James Strachan, chairman of the Audit Commission, said PbR was fundamental to the modernisation of the NHS, improving the responsiveness of the service and helping to enable patient choice. "But it is exposing weaknesses in financial and performance management and in information systems, all of which need to be addressed if the benefits are to be realised."

Strachan said, however, that it was clear that Foundation Trusts and PCTs have "been challenged" by the introduction of PbR. "There are real dangers for the NHS in the short term, particularly particularly given the recent increase in the number of organisations and areas with financial problems."

The Audit Commission report says there is no need to further postpone the introduction of PbR but urged NHS Trusts to make good use of the extra time to prepare for the full introduction of the new system of financial flows in 2006

Strachan added: “Health systems in other countries have benefited from the introduction of funding systems like Payment by Results and there is currently no reason to believe that the NHS’ experience in England will be different.”

The Audit Commission report points to Germany as an example of a health system that has introduced a funding mechanism similar to PbR, but has first invested heavily in upgrading information systems and improving data quality.

The report says that the NHS Care Records System, due to be delivered by NHS Connecting for Health by 2010, will go some way towards achieving this. "However, trusts still need to strengthen their internal arrangements to produce timely and accurate data."